Economists should not have been stunned by downward revisions to job creation for January and February. Similarly, analysts should not have been surprised by the painfully weak jobs data for March – information that confirmed the seriousness of the ailing U.S. economy.

Some folks are clinging to the hope that the slowdown is attributable to poor weather and West Coast port disputes. They want to believe that decelerating manufacturing activity, corporate revenue shortfall, weak consumption and unimpressive job creation are temporary. Yet the Federal Reserve itself recently downgraded its economic outlook for the the rest of 2015, 2016 and 2017. Two years and nine months? Does that sound like an economic “soft patch?”

Clearly, Fed committee members recognize that something more onerous is at play. The real question is, what will Janet Yellen and her colleagues do about it? If market activity on Monday, April 6, is any indication – a sharp decline for the greenback via PowerShares U.S. Dollar Bullish (UUP), a big time jump for the yellow metal via SPDR Trust Gold (GLD), a six percent leap for commodities like oil as well as a broad market rally for stocks – traders have convinced themselves that the Fed won’t be raising overnight lending rates anytime soon.

April investors may be breathing a collective sign of relief that the stock market is holding up. On the other hand, just how vulnerable is the U.S. economy to an actual recession if the Fed cannot even hike borrowing costs by a token increment (0.25%)? A self-sustaining economy should be able to handle hikes in overnight lending rates by several percentage points across eight, nine or 10 central bank meetings. Instead, a mere five months after the Fed formerly ended emergency level stimulus known as QE3 (i.e., third round of quantitative easing), uncertainty reins supreme.

We can note that the general uptrend for U.S. stocks is intact. However, the gains have been muted, particularly when one compares those gains with safer haven U.S. Treasury bonds. For instance, the S&P 500 has managed to climb roughly 4% since the end of QE3, whereas the perceived safety of longer-term bonds via iShares 20+-Year Treasury Bond (TLT) offered closer to 10% in the same period.

S&P and TLT Since 10-29

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